The Olympic Effect On Exports

The much-anticipated 2016 summer Olympics in Brazil’s sunny Rio de Janeiro kicks off in just a few days. Its build-up, much like most mega-events, have met with controversies. From the Zika outbreak to Brazil’s corruption, many have placed Rio 2016 under the microscope. But the most contentious issue of most, if not all of such mega-events is the country’s financial trade-off. Simply put, is there an economical advantage to hosting such large-scaled events?

The Olympic Effect: Olympics to trade boost - is it a coincidence?

Many purport that such mega-events often result in a gaping hole in the country’s account books. In this sense, skepticism pervades when the financial cons outweigh the pros. Take for example the opening ceremonies of Beijing 2008, which experts estimate cost $100 million to organize. Now consider that around 100 million Chinese live on less than $1/day, and that figure simply seems outrageous.

But authors of a study called The Olympic Effect argue the contrary. They found that the initial financial set-back is compensated with a permanent positive impact on trade - particularly on exports. Countries that have hosted the Olympics have 30% more trade than those who have not.

Here’s another example of the Olympic effect. In 1985, the year preceding Barcelona’s win to host the 1992 games, Spain recorded an export growth of 3.9% year on year. A year later, that figure jumped over six-fold to 24.3%. Similarly, in China, the country recorded an average of 16.4% growth in exports in the two years (1999 and 2000) preceding Beijing’s win to host the 2008 games. In the two years after (2002 and 2003), that figure shot to 49.4%.

The timing to award nations the right to host the Olympic games also often corresponded with a trade boost of some sort. In July 2001, China won the right to host the 2008 summer Olympics. Two months later, it wrapped up negotiations with the World Trade Organization - a huge boost for Chinese companies. The authors of the paper argue that this was no coincidence. It’s meant to create synergies between two strategies related to a country’s openness. Additionally, the International Olympic Committee (IOC) believes Olympic venus will continue to appeal to tourists even years after the event. As a country welcomes visitors, it opens its arms to economic inflow.

An economic propeller of Olympic-al proportions

Other countries have also used mega-events as a springboard to realize economic benefits in the form of greater openness. Take a look at the political and economical synergies of some other nations from hosting the Olympic games.

Published in 2011, the paper does not include London 2012. But post-Olympic trade benefits were also evident in the UK. It exceeded its four-year post-Olympics economic target in half the expected time: recording a trade boost of £14 billion in two years - surpassing even its four-year target of £11 billion.

All in all, the paper finds that hosting mega-events such as the Olympics generally leaves a positive impact on national trade and exports. It begins with an idea to host, which signals a country’s desire to liberalize. And that stems from a larger strategy of signaling openness. All that being said, it concludes, evidently, in a greater degree of trade and exports both substantively and permanently. Or in other words, the Olympic effect.